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Democrats Try to Push Expensive Stimulus Past Distracted Congress

Posted By Stephen Keen On September 25, 2008 @ 6:28 pm In Ongoing Priorities | Comments Disabled

Congressional Democrats think they have spotted an opportunity. With lawmakers and the American public focused on the pressing financial crisis, both Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) are rushing another massive spending bill through Congress. In ordinary times these bills would be debated at length with significantly more scrutiny. Unfortunately, the Democrat-led Congress is using the current situation to ram bad legislation through the legislature with very little examination.

Yesterday, the House passed the multi-billion dollar continuing resolution (CR) [1], including a $25 billion loan guarantee to bailout the auto-industry and $24 billion in disaster aid. Today Reid is attempting to sneak the oil shale ban back into the Senate version [2] of the bill. However, the congressional leadership isn’t done yet. Tomorrow, Pelosi plans to vote on a second multi-billion dollar stimulus bill. The first stimulus bill clearly failed to stave off economic crisis. Logic would dictate not to continue down the same path. The congressional majority disagrees.

Last week, Rea Hederman, Brian Riedl and I outlined in detail why a second stimulus bill will fail [3].

The second stimulus is likely to include:

Funding for infrastructure projects. The plans reportedly spend several billion dollars on infrastructure projects such as new highway construction. The assumption is that public projects create jobs and thus boost the economy. However, as Heritage Foundation scholar Ronald Utt points out [4], “the vast majority of independent academic and federal government studies on the relationship between infrastructure spending and economic activity have found that the impact is very modest and long in coming.” Highway spending simply transfers jobs from one part of the economy to the other. This plan hardly stimulates the economy.

Additional Medicaid funding for states. Reportedly, the stimulus would give away significant sums of taxpayer dollars to states in an effort to bail out cash strapped Medicaid programs. Giving an increase in funding to the states is not a real solution. In the long run, states will either have to replace these temporary federal funds with states funds or come back to Washington for more money. Rather than throwing money at a problem, Congress should consider implementing real reforms to avoid problems accruing in the first place.

Food stamps and additional unemployment insurance. The stimulus bill would reportedly include additional funding for food stamps as well as yet another extension of unemployment benefits. This proposal relies on the assumption that increased government spending will stimulate the economy. That theory has been repeatedly proven incorrect [5]. Rather, this type of spending merely redistributes money from one group of people to another with little economic effect.

Despite this dizzying blur of legislative activity, conservatives should keep their head on a swivel and not allow the Congressional leadership to sneak anything by them. Despite the urge to finish quickly and begin the campaign, Congress must examine the fine print of each bill. More government spending does not stimulate the economy. Allowing a wasteful and ineffective second stimulus bill to pass in the rush to leave Washington would be a grave mistake.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/09/25/democrats-try-to-push-expensive-second-stimulus-past-a-distracted-congress-and-public/

URLs in this post:

[1] multi-billion dollar continuing resolution (CR): http://www.foundry.org/2008/09/24/don%e2%80%99t-forget-the-other-multi-billion-dollar-spending-bill-being-debated-this-week/

[2] to sneak the oil shale ban back into the Senate version: http://www.foundry.org/2008/09/25/harry-reid-sneaks-in-oil-shale-ban/

[3] why a second stimulus bill will fail: http://www.heritage.org/Research/Budget/bg2186.cfm

[4] points out: http://www.heritage.org/Research/Budget/bg2121.cfm

[5] proven incorrect: http://www.heritage.org/Research/Economy/wm1777.cfm

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